In a decision making headlines across the nation, the Ninth Circuit reversed the Central District of California, which had given Mattel ownership rights to the Bratz doll brand after a jury found that the designer who created the dolls was working for Mattel when he conceived the idea. Along with ownership of the Bratz brand, the district court also ordered Bratz manufacturer MGA to pay Mattel $10 million in damages.

The Ninth Circuit held that MGA had significantly improved the value of the Bratz brand as a result of its investment in the product, development efforts, and marketing since the dolls were first sold in 2001. Writing for a unanimous three-judge panel, Chief Judge Alex Kozinski maintained that it would not be equitable to completely revoke MGA’s ownership of the billion-dollar Bratz line, even if development of the brand may have started with a misappropriated idea. In so holding, Judge Kozinski stated that a significant portion – if not all – of the jury’s verdict and damages award should be vacated, and that the entire case will probably have to be retried.

Bloomberg provides an overview of the case. The Wall Street Journal offers additional commentary about the prolonged legal battle between Mattel and MGA to determine the rightful owner of the Bratz brand.

The problems between the two companies began in August 2000, when Mattel employee Carter Bryant pitched his idea for the Bratz line of dolls to Mattel’s competitor, MGA Entertainment. Upon discovering that Bryant had conceived the Bratz idea while he was still employed by Mattel, Mattel sued MGA and Bryant on a theory of copyright infringement and breach of contract. In 2008, a jury in California awarded Mattel $10 million in damages and the district court transferred the Bratz trademark portfolio to Mattel.

In reversing the decision, the Ninth Circuit noted that there was ambiguity in Bryant’s employment contract in which he agreed to assign all of his “inventions” to Mattel while he was employed by the company. Although it is possible that the definition of “invention” could include an idea, such as the idea for the Bratz dolls, the Ninth Circuit held that the text of the agreement does not compel this conclusion. As a result, the district court erred in holding that the agreement, by its terms, clearly covered ideas. According to Judge Kozinski, ideas like Bryant’s conception of the Bratz dolls “are ephemeral and often reflect bursts of inspiration that exist only in the mind” therefore they may differ from tangible inventions. MGA v. Mattel at 8.

Furthermore, the Ninth Circuit found that it would be unfair to revoke MGA’s ownership rights to the Bratz dolls after the company had invested significant time and money to develop and market the incredibly successful brand. The district court’s decision was inequitable because “Mattel acquired the fruit of MGA’s hard work, and not just the appreciation in value of the ideas Mattel claims it owns.” Id. at 10.

The Ninth Circuit’s ruling is significant because it may make it more difficult for corporations to claim ownership of their employee’s ideas, especially if those ideas are conceived in a private context. Mattel has stated, however, that it is looking forward to a retrial of all of its claims against MGA. Despite MGA’s apparent legal victory in the Ninth Circuit, the battle between Barbie and the Bratz is far from over.